Can someone PLEASE explain how the Dow hasn't dropped 30 - 40% given the inflation rate... I am simply someone who has been waiting forever to get back in the market after large dip....how in the hell is it still around 33,000....is it being held together by chewing gum, and its a house of cards? What am I not understanding here??????
Inflation actually pumps the stock market and other assets like real estate, gold, and cryptocurrencies. The Fed has been using Quantitative Easing for the last 10 years or so, which means they are printing dollars to buy assets like stocks, which pumps up the stock market. Now that the Fed has started Quantitative Tightening, where they are unloading assets off the balance sheet, assets like the stock market and gold should drop. The M2 money supply actually shrunk for the first time in 12 years.
Real estate also pumped due to cheap money and inflation. Since the Fed has been ticking up interest rates, home loans have gone from ~2.5% to around 5.5%, which is a huge difference for someone buying a house. Housing prices should start to come down.
tldr: As the Fed tries to fight inflation, expect the stock market and real estate to feel more pain over the next few years. Thinks like energy and companies that produce things will actually do well. Since the DJI has a lot of companies that produce things, it will do well compared to the SP500.
